Analysis

In My Opinion: Ismail Demir, Turkish Technic and Yavuz Çizmeci, myTECHNIC

The aviation industry is growing in Turkey and the MRO market has been identified by the country’s government as having immense potential. ATE&M caught up with Turkish Technic’s Ismail Demir, GM, and myTECHNIC’s Yavuz Çizmeci, CEO, to find out how these companies of different size and scope are faring, and why a policy of co-operation is benefiting Turkey’s MRO industry.

The aviation industry in Turkey, led by the growth of Turkish Airlines, seems to be doing extremely well at the moment. What does this mean for Turkish Technic?

ID: With the growth of aviation in Turkey overall, and especially Turkish Airlines, it makes us better known in the world. This boosts our morale and desire to perform better. Passenger expectations about the level of service have also increased, and we’ve found that we have to be better in many areas — not just in the technical environment, but in cabin interiors, and all the other things related to airline services. We have to be more careful, whilst constantly improving our quality of service. This too helps us to be better known around the world. About six to eight years ago, many peoples’ perceptions of Turkish Technic, Turkish Airlines, or Turkish aviation in general was of a third-world standard or country — but now that perception has changed radically.

What about myTECHNIC? How has the company positioned itself within the context of the growth in Turkey, and yet an economic downturn in a global sense?

YC: The decision to invest in myTECHNIC was not a one-day decision, it took almost 20 years. In the last ten years, what has been going on globally in the world, in aviation, and what particularly has been going on politically and economically in our “region” and in Turkey, led us to decide on making such a big investment. The definition of the “region” for me is in the West as far as the UK and Iceland; in the East as far as India, China and central Asia; in the north covering Russia and the Nordic countries; and in the South north Africa, the Middle East and Gulf areas. So when you take this region, there is more than five thousand aircraft. This macro scale outlook has pushed us into making the investment.

The stability of the Turkish government is the first important factor. Where there is stability there is economic growth, production and consumption. It is the only way to attract international capital into the country, and this is what has happened, and is happening. The government has also paid a great deal of attention to the aviation sector, not only for the airlines but for the MROs [maintenance, repair and overhaul providers]. The government would like to see Turkey as a major world maintenance centre. That is the region’s goal, and that is what is happening.

How is this ambition being fulfilled?

YC: We have invested, Turkish Technic has invested, and MNG Technic has invested. We have huge capacity. People have said, "Aren’t you afraid of this huge capacity?" but no, I am not, because three years ago there was no such capacity and for that reason there was no attraction. But now we have a capacity of 12 bays, which means we can maintain 12 narrowbody aircraft at the same time. Our bays are even starting to fill in the low season. That means there is not an overcapacity question; the important thing is that when you supply the capacity it should be the right quality, the right TAT [turnaround time], the right price. If you offer this then you give the customer confidence. The Turkish aviation industry has tripled in the last ten years, so that’s another factor. Ten years back we had only 100 aircraft in Turkey, but now we have 350. This expansion itself requires additional capacity.

How did Turkish Technic fare during the global downturn in the aviation industry and what business strategies have you modified or put in place as a result?

ID: The net effect has not been that much, simply because growth at Turkish Airlines continued, and this is our core customer. Because we did not have all the necessary infrastructure in place when the crisis came, we tried to squeeze more aircraft into our current facilities. So in a sense we were not caught out by the crisis.

How would you describe the state of the aviation industry in Turkey now?

ID: The state of Turkish aviation is strong in terms of the economics of the country. Domestically, many Turkish citizens have learnt that flying is a preferable, enjoyable and affordable thing to do. We have more people flying, so it boosts the aviation industry. Looking at the entire picture, we see more and more players in the manufacturing sector, and more in the services area. Some of these will soon be global companies.

What are the country’s strengths and weaknesses?

ID: The strength of the industry is its quality, the education level of the people, the quality of the work produced and the price. If you combine all of that, Turkey provides an advantage for almost all customers. One weakness is engine capability, as well as modifications and manufacturing. This is slowly increasing, but it needs more attention. So investment is taking place to develop manufacturing capabilities, and in research and development.

MROs should also create value for the customer by creating new technologies. This means more engineering, in terms of human resources, and more design and development engineers. This is the weak point that we are trying to strengthen. In civil aviation, because Turkey is not currently a member of the European Union, it creates a lot of problems, particularly in relations with EASA [the European Aviation Safety Agency]. This creates difficulties for us in terms of licensing and in dealing with multiple authorities.

In which areas of the world are you expecting to do the most business in the next few years?

ID: For airframe maintenance, our business is generally conducted within the parameters of approximately four hours flight from Istanbul — so any customer within that area is our target because we have different dynamics for each country and region. I don’t want to say any specific country or region is our target, but we do have a large potential market. In some areas, such as western and central Europe, we have a lot of competitors so it might be harder to get business there. But as we do get business it enhances our brand name, and we are more likely to win additional business in the future. However, we have made quite a heavy investment in components. Traditionally in our company this wasn’t such a big area, but in the last three years or so there has been a mental change within the company to go for full services for components. As far as component work is concerned, the entire world is our market.

YC: Our eyes are first looking to Europe because there is an enormous development in aviation there, with low cost carriers etc. There is a lot of competition, but where most companies are already established, we are new, and this gives certain advantages. This is especially so if you have lean concepts and if you have a good staff of mechanics and technicians. We are not afraid of the competition. We need to give more confidence to the European companies. That is one of our main targets. We are also looking at Africa very carefully; we have a lot of customers there, as well as the Middle East, central Asia, and even India.

What about the aircraft types you expect to visit your facilities most frequently?

ID: Our primary target used to be narrowbodies, but widebody aircraft capabilities are increasing. In this market, we don’t have 747 heavy maintenance capability yet, nor on the 787 or A380. Other than that, we have most of the types available. Do we need to invest in some of the new types for the future? Sure we do. I don’t think Turkish Technic would be a strong player ten years down the road without doing so.

What impact has the political unrest in the Middle East had on business?

ID: At the moment, it is causing some problems. For example, we used to have some customers from Libya. But when the storm has gone, we hope it will create some advantages. It could help us by many means. One interesting thing is that I have heard some people expecting Turkey to be in the middle of this kind of turmoil as well, without knowing anything about the country. Anyone that knows Turkey can see that it is a stable place and can ultimately benefit from the unrest — not now, but in the future.

YC: This is a very important question. What has been happening in the last six to eight months in the region has helped us a lot. The standing of Turkey’s political leaders has helped Turkey in general, and in particular our business, to attract more custom. When the prime minister is being accepted in many countries as a respectable leader, that means the country is having a positive effect. It increases the political standing of the country and creates an advantageous position.

What kind of relationship do you have with other Turkish MRO companies? There appears to be some co-operation taking place - what are the major advantages of working in this way?

ID: We are trying to complement each other. Historically, salaries and wages in other parts of the world have inflated, so with those rates and working habits it is not easy to stay competitive without matching them. While we have to continue with a relatively high labour rate, our MRO partners in Turkey are complimenting us by providing lower labour rates. Where we need support, we sometimes send aircraft to them, for sanding or painting for example, where work or direct labour is required and we need it done cheaper. In return, they are sending us components, which we have the capabilities for.

This doesn’t mean there is zero competition — of course there is competition. However, that competition is played out in a friendly manner. We have "gentlemen's agreements" whereby whoever wins a contract, we would not usually try to undercut each other, but instead provide support with tools or equipment. In general, what we see is that if the country is known as a good maintenance resource, then this will ultimately benefit everybody. We think all other MROs have this understanding. The name of the company doing the work will be second in peoples’ perceptions.

YC: It is the optimisation of national resources, and that comes with awareness and good education. Turkish Technic has excellent management and they are very open for co-operation. They are looking at the macro scale, looking at us not as a competitor but as a cooperator. Although it is a friendly competition between the three companies [Tukish Technic, MNG Technic and myTECHNIC], one is the mother company. Turkish Technic has a long history and is a big power in respect of its technical capabilities. They let us use these capabilities and advantages and that helps us, so that instead of investing in those shops and capabilities we can invest in other areas where Turkey needs additional investment. It is a management approach and, I must say, a very positive approach.

How big can your respective companies become in the MRO industry?

ID: We have a saying in our circles that some years down the road — it could be five, or at most ten — that if you ask anyone in the world to count the five best MROs in the world, that person should count Turkish Technic among them. In our vision, we have to be a company that our customers are proud of working with. Proud means that any customer would love to mention your company name as a mark of quality. If someone is proud of mentioning your name it means he is happy with his relationship with you, in terms of quality or price.

YC: myTECHNIC will be one of the select MROs in the region, as I have defined it. We might see the same brand, one or two more, in different continents — say in Europe, Russia, or Africa, with the present company being the mother company. So we might see some more myTECHNICs around the world.

What do you see as the major emerging trends which will have the most impact on your business?

ID: New technologies in airframe and other areas might change the way MROs operate. For example, with many new aircraft you need more expertise on composites — the way you got used to repairing aluminium may no longer be valid. I also see preventive maintenance, or on condition maintenance, becoming more popular. So technologically, MROs should be prepared, in co-operation with OEMs [original equipment manufacturers], to use more technology to follow up the aircraft or component during operation, so that they can act ahead of time to prevent any failure and also to reduce maintenance costs. If we continue as we are then the best we can do is to concentrate on getting leaner.

Do you see consolidation taking place in the MRO industry, whether in Turkey or more generally?

YC: When there is co-operation, it leads you into two things. On one hand, relations get much better, and that can make mergers possible. But on the other, when there is good cooperation there is no need for mergers.

ID: It is a trend in the world. For us, it is about joint ventures and joining forces with experts. We are, in a sense, doing it on a smaller scale. However, with our current size and synergies there may come a day when we are not as strong as some of our competitors, and on that day we might need some extra co-operation. Right now, in principle we are open to any discussion that would create synergies. We could become a partner in a specific area, for example, if there is a business case.

But in general, we have been seeing consolidation, and this makes us invest in other areas in order to become a large global player. This is our aim — we don’t want to be local, and we don’t want to be small. To achieve this, we have to have customers from different parts of the world, and we have to be where the customer wants us to be — in terms of line stations or base maintenance. To that end, we have been in contact with other parties, and some day in the future you might see us having facilities in different parts of the world, as some of the other companies do.

TAGS: Airframes
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